Modine Business Report FY2008

Business Highlights

Financial Overview (in million dollars)
  FY2008 FY2007 Rate of
change (%)
Sales 1,408.7 1,601.7 (12.0) 1)
Operating Income (103.6) (54.4) - -
OE- Asia
Sales 17.4 15.0 16.0 2)
OE- Europe
Sales 597.4 757.7 (21.2) 3)
OE- North America
Sales 481.8 521.1 (7.5) 4)
OE- South America
Sales 136.4 136.9 (0.4) 5)

-The instability in the global financial and economic markets has created a significant downturn in the Company's vehicular markets, particularly within Europe.

OE- Asia
-The gradual increase in sales is attributed to a growing presence in the region and the completion of construction of new facilities. The new manufacturing facility in Changzhou, China began production in the third quarter of FY2007, and the Chennai, India facility began production in the second quarter of FY2008.

OE- Europe
-Sales decrease is primarily on a 179 million USD decline in underlying vehicular sales volumes, partially offset by an 18 million USD favorable impact of foreign currency. exchange rate changes.

OE- North America
-The sales decline is largely due to the downturn in the North American truck market following the January 1, 2007 emission law change, which has been further exacerbated by the impact of the global recession.

-Net sales continue to be adversely impacted by the depressed heavy duty and medium duty North American truck markets and the automotive vehicular markets.

OE- South America
-The continued strength in the Brazilian agricultural and commercial vehicle markets were offset by a 2 million USD unfavorable impact from foreign currency exchange rate changes.

-The Company announced that it has sold substantially all of the assets of its Thermacore, Inc. electronics cooling subsidiary, based in Lancaster, Pennsylvania, for 13.25 million USD. The purchaser, FSBO Ventures, is owned by current and former members of Thermacore's management team. (From a press release on May 1, 2008)

-The Company announced its planned divestiture of its Korean-based vehicular HVAC business. Scaling back the vehicular HVAC business will enable the Company to focus its human and financial capital on its global engine and powertrain cooling, and refrigerant component segments, in which it continues to experience profitable growth. Other vehicular HVAC businesses will be the subject of further evaluation over the next 12 to 18 months. (From a press release on Oct 21, 2008)

-The Company announced the intended closure of three North American plants as part of a restructuring program that will realign its manufacturing operations, improve profitability and strengthen global competitiveness. Scheduled for closing are the Company's plants in Camdenton, Missouri; Pemberville, Ohio; and Logansport, Indiana. On February 4, 2008, as part of its global manufacturing realignment, the Company announced the intended closure of its facility in Tubingen, Germany. The closures will take place over an 18- to 24-month period, with production to be consolidated primarily to other Modine North American facilities. (From a press release on Apr. 3, 2008)

-The Company, updating on its restructuring program, announced a reduction in force in its headquarters in Racine, Wisconsin, USA, affecting approximately 170 personnel. This represents about 25 percent of the workforce in Racine. The program also calls for a plan to significantly reduce the workforce in its Bonlanden, Germany-based European Headquarters and TechCenter. (From a press release on Jan 19, 2009)


R&D Expenditure (in million dollars)
  FY2008 FY2007 FY2006
Overall 80.6 93.2 82.3

R&D Structure
-In late FY2008, the Company formed an Advance Solutions Research team which is focused on identifying external research projects which complement strategic internal research initiatives and can be supported by either government or customer funding in order to further leverage the Company's significant thermal technology expertise and capability.

-It has been granted 2,400 worldwide patents over its life.

R&D Activities
-Recent R&D projects have included Waste Heat Recovery Systems developed for a major U.S.-based engine manufacturer in conjunction with the U.S. Department of Energy to help engine and truck manufacturers meet ever increasing demands for emissions reduction, while simultaneously improving powertrain efficiency and, thus, fuel economy; next generation aluminum radiators for the commercial vehicle, agricultural and constructions markets; and EGR technology, which enables its customers to efficiently meet tighter regulatory emissions standards.

Investment Activities

Capital Expenditure (in thousand dollars)
  FY2008 FY2007 FY2006
Original Equipment- Asia 16,047 15,236 2,839
Original Equipment- Europe 54,485 35,892 22,260
Original Equipment- North America 26,352 23,073 25,486
South Americas 3,970 7,385 3,511
Commercial Products 2,157 1,595 6,476
Fuel Cell 249 589 546
Corporate and administrative (652) 1,408 15,114
Eliminations - - (58)
Capital expenditures-
continuing operations
102,608 85,178 76,174
Capital expenditures-
discontinued operations
653 4,262 7,372
Total capital expenditures 103,261 89,440 83,546

Investments Outside USA
-The Company announced that it plans to grow the company's refrigerant components business. In September 2008, the Company broke ground on a new plant in Kottingbrunn, Austria, to meet increasing demand for condensers from European automotive customers. In addition, the company has committed additional financial resources to expand its North American condenser manufacturing capabilities. Also, the Company has established a Refrigerant Components team within its Powertrain Cooling Group. (From a press release on Oct 17, 2008)

-The Company announced the opening of its manufacturing operations in Chennai, India. The Chennai facility will serve Indian engine, commercial vehicle and off-highway makers. Its Chennai facility will serve as a base from which the company can expand its engine and powertrain cooling product lines to new markets. Production launch at the facility, a $14 million investment, is scheduled for December 2009. (From a press release on Nov 13, 2008)